Tesco’s shareholder revolt overshadows sales news

MARTIN FLANAGAN

NEARLY 50 per cent of Tesco shareholders failed to back the remuneration report at today’s AGM in an embarrassing blow for the supermarket giant that took the gloss off better-than-expected trading figures.

Just under 11 per cent of votes were cast directly against the report, in a revolt against a £1.2 million payoff to sacked former chief executive Phil Clarke and just under £1m to former chief financial officer, Laurie McIIwee.

But added to the 38 per cent of votes that abstained on the issue, it meant that about half the company’s shareholders refused to support management on the issue.

The payoffs were initially suspended while Tesco investigated last year’s £263m accounting scandal, but the group eventually decided it was contractually committed to make the payments.

The Investment Association, which represents big fund managers, issued an “amber top” warning against the “golden goodbyes” awarded to Clarke and McIlwee.

Shareholder action group Pirc also recommended that investors vote against the remuneration report. It follows other recent investor protests at boardroom pay, most notably for Sir Martin Sorrell at the WPP advertising giant.

One food retailing analyst said: “It is an embarrassment for the company, for sure, but a pity in some ways because the latest trading update was more positive than many expected. Dave Lewis [the ex-Unilever man who succeeded Clarke last summer] is getting a grip of the previous sales decline.”

Tesco revealed that like-for-like sales fell 1.3 per cent in the first quarter of its financial year, better than the City expected and an improvement on the 1.7 per cent sales fall in the previous quarter.

It was also much better than the 4 per cent same-floorspace sales decline in the same period of last year. Lewis said: “Whilst the market is still challenging and volatility is likely to remain a feature of short-term performance, these first quarter results represent another step in the right direction.”

Sales in Ireland fell by 4.4 per cent – compared to 5.6 per cent a year ago - while Asian revenue dropped by 3 per cent, a slight improvement on the 3.2 per cent fall in first quarter of last year.

Tesco said separate figures from Kantar Worldpanel had also shown that 180,000 more customers shopped at its stores in the sales quarter to 24 May.

Lewis added: “We set out to serve our customers a little better every day and the improvements we are making are starting to have an effect.

“We are fixing the fundamentals of shopping to win back customers and relying less on short-term couponing.”

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said “one swallow does not make a summer”, but added that there were “nonetheless signs of progress, not least of which seems to be a softening of customer disapproval [towards Tesco]”.

Forecasters had predicted the company’s first quarter like-for-like sales would be down about 2 per cent as Lewis imposed measures to revive the fortunes of Britain’s largest supermarket operator.

These included moving the main HQ from Cheshunt in Hertfordshire to Welwyn Garden City, announcing the closure of 43 loss-making stores and shelving plans to open a further 49.

Lewis has also cut prices across hundreds of lines as the supermarket price war hots up with major grocers battling discounters Lidl and Aldi.